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CHRIS MATTHEWS, HOST: Farewell to arms. The preacher who brought us the Moral Majority leaves the field. Are we seeing the end of the powerful Republican evangelical alliance? Can the GOP or the pulpit find a leader to keep it alive?

Let‘s play HARDBALL.

Good evening. I‘m Chris Matthews. Farewell to Falwell. Tonight, the loudest political voice of Christian evangelism is silent. The man who led the Moral Majority against the banishing of prayer from public school, who resisted Roe v Wade and spoke ferociously against same-sex marriage and the gay lifestyle has joined American political history. Is there a Republican out there tonight in this country of 300 million strong who can rally those 30 million voting evangelicals who gave President Bush his popular majority in 2004? Is there another Jerry Falwell capable of sounding the bugle with such excitement for battle?

Meanwhile, the president‘s men face the heat. The deputy to Bush attorney general Alberto Gonzales quits, making him the fourth top aide to split. Karl Rove, the architect of Bush‘s election, faced down a deadline for having his Justice Department e-mail turned over to Congress. And Paul Wolfowitz, the architect of the Iraq war, is declared unethical by the World Bank. And now Bush‘s strongest 2008 ally, Senator John McCain, is being targeted by an anti-war group led by ex-generals, just as the president tries to cut a deal with the Senate over war funding.

Later tonight, “NBC NIGHTLY NEWS” anchor Brian Williams on his exclusive interview with British prime minister Tony Blair. And we‘ll talk to David Iglesias, one of the U.S. attorneys fired by the Justice Department.

But first, joining me now is former presidential candidate the Reverend Al Sharpton of the National Action Network and my colleague, the host of MSNBC‘s “SCARBOROUGH COUNTRY,” Joe Scarborough.

Reverend Sharpton, what do you make of Reverend Falwell?

REV. AL SHARPTON, NATIONAL ACTION NETWORK: Well, you know, we didn‘t agree on anything. We used to debate very—very vociferously a lot on this show. There was a time every Friday he and I would come on with you and debate. But we got to know each other. In private, he was a very, very nice guy. I mean, he was very cordial, always would ask me about my daughters, how they were doing in school, was always very concerned. I never saw him in a studio not speak to the doormen, not talk to regular people. So he‘s one of the few people that I know that was of national acclaim that never let it go to his head.

He was a decent guy. I‘ve had lunch with him and breakfast with him, visited him in Lynchburg. I have a chapter of National Action Network under Reverend Coleman (ph) there. So he was a genuinely decent guy. I just didn‘t agree with him on anything. And we used to tease each other about how both of us were national and controversial, and I‘d say, yes, but I‘m right. We also would joke with each other about our weight. We‘d compare who was up and who was down. And he was a decent man, and I certainly extend my condolences to his family.

This is no day for a harsh judgment. But Joe Scarborough, was he for real? Did he believe a lot of the campaigning he did that said Bill Clinton and the chronicle—“The Clinton Chronicles” was guilty of murder, that the gays were somehow responsible for 9/11 in some spiritual sense. He popped out with that, then took it back. Was that showmanship? Was that true belief? How would you describe...

(CROSSTALK)

JOE SCARBOROUGH, HOST, “SCARBOROUGH COUNTRY”: I don‘t think it‘s showmanship. I mean, there are a lot of things that he would say that I think evangelicals have been—heard from pulpits for hundreds of years.

MATTHEWS: Yes.

SCARBOROUGH: And one of the first dust-ups was when he said that God didn‘t hear the prayers of Jews back in the early 1980s. And I remember it offended so many people and—you know, and evangelicals would just kind of roll their eyes and think, Gee, why did he say that?

MATTHEWS: Was he misquoted?

SCARBOROUGH: No, I don‘t think he was misquoted. Again, I think—again, I mean, there are a lot of things—like, for instance, everybody‘s so shocked when he would suggest that tragedies would befall the United States of America because of the sins of its people.

MATTHEWS: Right.

SCARBOROUGH: That‘s—listen, God didn‘t flood the earth based—you know, in the Old Testament because everybody was great, he was just bored.

SCARBOROUGH: I mean, it was—you know, it was because of homosexuality and adultery, et cetera, et cetera, et cetera. So he was an old-time preacher. He got...

MATTHEWS: Well, he saw Sodom and Gomorrah here.

SCARBOROUGH: Sure he did. Sure he did.

MATTHEWS: Yes.

SCARBOROUGH: But you know, I think—that‘s not what made him the character that—that it made him in American history. I heard somebody on MSNBC earlier today saying that he wasn‘t that important of a figure. He was an extraordinarily important figure. I remember when my parents got their first Moral Majority letter back in, I think it was 1980, during the Reagan campaign. And it really was, it was like a lightning bolt coming in the living room because my parents and tens of millions of people like them felt like they were still under siege from ‘68 and—you know...

MATTHEWS: Sure.

SCARBOROUGH: ... and LBJ and the protests in the street, Kent State. They thought that the world was coming apart at the seams, the world they‘d known. And Jerry Falwell talked about a Moral Majority that believed in prayer in school and believed in all of these values they‘d been raised on. And he really struck a chord. This was a battle between the Jane Fondas of the world and the John Waynes of the world.

MATTHEWS: Yes. Let me...

SCARBOROUGH: And he cut through that.

MATTHEWS: Let me go to Reverend Sharpton. You know, a lot of people grew up in the Bible Belt and all over America, really, except maybe in some big cities, reading the King James version of the Bible as part of their school—daily routine. And then the Supreme Court came along and said you can‘t have any organized prayer in public schools. People tell me that was the real ignition to the whole Moral Majority, that decision by the Court.

SHARPTON: I think that‘s true. I mean, and even some of us that are more progressive and liberal had said it should be an option if people want to pray in school or want to read the Bible in school, not just eliminate it, because people—I grew up in the inner city, and I still had that kind of raising from my mother and father.

And I would say that I have to agree with Joe. I—again, I did not agree a lot with Jerry Falwell. I certainly fought him on a lot of issues, from his position on South Africa going forward. But two things I would say, and I‘m not saying it‘s because you don‘t say anything bad against the dead, I just think it‘s true. I think he was an important figure. I think that in his personality, we see an era in American politics that for my kind of politics, unfortunately, did work. He was parallel with the whole Reagan era and into Bush, Sr. And I think he was sincere.

I have met a lot of preachers in my life that when you get off the pulpit or off the stage or out of the studio, and they are totally different. Jerry Falwell was the same. I really believe he believed that. I never saw a disingenuous moment. And I got to around him in off-guarded moments from time to time. I think he believed it. Now, I don‘t think it was right, but I think he believed it.

MATTHEWS: So he was no Elmer Gantry, right?

SHARPTON: No. I did not see any greed in him. I did not see—I mean, all of us have egos who are public figures, but I don‘t think he was doing things for showmanship. I would agree with Joe. I think he would get way out there, but I think even way out there, he was basically saying stuff that he fundamentally believed.

MATTHEWS: Did he believe that Clinton was responsible for capital crimes down in Arkansas when he put out “The Clinton Chronicles”? Did he believe that, do you think?

SHARPTON: I don‘t know. I don‘t know if he believed it literally, but I—if I—do I think he believed that Clinton had done criminal things and bad things? Yes, I think he believed that. I used to tell him I thought he was crazy, but I think he believed that. I do not think he was sitting somewhere, saying, How do I get (INAUDIBLE) crowd or how do I say the most outrageous thing. I just never got that sense of Jerry Falwell being like that.

MATTHEWS: Joe?

SCARBOROUGH: Well, I was going to say it wasn‘t just—you talked about school prayer in 1962. It wasn‘t just that. It was that followed by the chaos, whether it was the Beatles, people growing their hair, all the things that were celebrated...

MATTHEWS: Yes.

SCARBOROUGH: ... the coming of the progressive era...

MATTHEWS: Well, what got them into politics, into voting? That‘s the key...

SCARBOROUGH: What ended up getting them into politics—you know, it‘s so funny. You have a lot of evangelicals now saying, Why aren‘t our parents as crazy as they were back in the ‘70s and the ‘80s? Why have they moderated so much? It‘s because they thought, because of the sexual revolution and the drug revolution and all the things that were coming in, X-rated movies coming in on Main Street and—they saw a cultural meltdown and they—so—so they responded. It was a counterrevolution.

And what got them involved was their children. They didn‘t like the world that their children was growing—that were growing up—they didn‘t like what was happening in the schools. They didn‘t like drugs in the school. They didn‘t like premarital sex. They didn‘t like the movies that their kids were going to. They didn‘t like all of these things, and it was a counterrevolution, a response to what happened in the ‘60s and the ‘70s.

Now, the Reverend says—Reverend Sharpton says he disagreed with everything that Jerry Falwell stood for. I would guess that‘s not the case at all, that Reverend Sharpton has a lot of people following him that would agree on issues regarding, you know, the drug revolution, the sex—The A lot of the excesses of the 1960s. Jerry Falwell saw himself as somebody that would provide a counterbalance in American culture. Now, Republicans embrace that, but I would say there are a lot of Democrats that embrace the same type of...

SHARPTON: No, I—I...

SCARBOROUGH: ... of counterbalance.

SHARPTON: I would concede that. I meant in terms of even how we would combat them on the political side. But I would concede that, which is why I think he hit a chord in this country because I think there was some reality that he addressed. We may not have agreed with how he addressed them and what he suggested we do, but there were some things he would address that just certain other people in the political social world was not addressing.

MATTHEWS: Well, how—Reverend Sharpton, you ran for president. How did the Republican Party—not that you‘re a member of it or anything, but how did they put together that coalition? We had 121 million people voting in the 2004 election because there was that explosion, that ballooning of people who were voting who hadn‘t voted before, basically white evangelical conservative, had shown up to the polls because they like George and Laura Bush‘s lifestyle. They believed in him as a couple, and they believed in what they stood for. Are they going to come out again?

SHARPTON: Well, first let me say I hope not, but I think that—not, at least, for the Republicans. But I think that people can never underestimate charismatic figures who take risks. And your opening question was could they come up with someone that would fit Falwell‘s shoes. I don‘t know. I mean, it‘s a combination of charisma, but it was also a combination of having the guts to stand out there and stay what a lot of people won‘t say but you know a lot of people are feeling. Whether they can have that kind of leader between now and the 2008 election, I don‘t know. I hope not because I don‘t hope they win. But I don‘t think that‘s something we can calculate. And I think that part of the problem with the (INAUDIBLE) Republican candidates you have is that they‘re so much equivocating. The one thing about Falwell is he didn‘t equivocate, he was what he was, and he didn‘t mind people being opposed to it. And it‘s hard for people to rally around things that are kind of in flux.

MATTHEWS: Well, now the Republican Party faces a couple things going wrong. One, they don‘t have a Southern conservative evangelical running. They don‘t have somebody close to that, like George W. Bush. They have maybe Fred Thompson. And they don‘t have somebody to blow the bugle from the pulpit, either. They have two missing factors right now. There are a lot of guys running for president with many qualifications, but none of them is someone from the Bible Belt. Nobody that...

SCARBOROUGH: But you know, Ronald Reagan wasn‘t from the Bible Belt. Ronald Reagan didn‘t go to church, and Ronald Reagan had a dysfunctional family, and Ronald Reagan—well, he did. And I love...

(CROSSTALK)

MATTHEWS: ... his appeal.

SCARBOROUGH: His appeal, though, was that he was on the—like I said, I‘ve always believed that American politics since 1968 was split (INAUDIBLE) Jane Fonda or are they on the side of John Wayne? Reagan was this—this traditional, Let‘s take America back to where it was before all the hippies like Matthews took over the streets...

MATTHEWS: Right.

(CROSSTALK)

MATTHEWS: What you‘re saying is what Bob Casey, the late Bob Casey of Pennsylvania, used to say, that Pennsylvania—he didn‘t—he‘s a Democrat.

SCARBOROUGH: Right.

MATTHEWS: He said Pennsylvania‘s a John Wayne state, not a Jane Fonda state.

SCARBOROUGH: The thing is, though, the evangelical movement, though, has changed dramatically since 1980. In 1980, again, it was a movement under siege. They believed that the country was tearing apart at the seams. Now you talk to young evangelicals going to Christian colleges, they‘re more interested in going to Africa or they‘re more interesting in going to New Orleans or they‘re more interested in—in...

MATTHEWS: Service.

SCARBOROUGH: ... in service because they don‘t feel like the country is torn apart at the seams, they feel like, Hey, you know what? We may have won that cultural battle, now let‘s worry about the things that the Bible told us. So there‘s not going to be that—who is the most powerful Christian figure in America right now? Rick Warren. Rick Warren‘s talking about how people become better servants. He‘s not talking about how you win elections.

MATTHEWS: OK...

(CROSSTALK)

SHARPTON: “Purpose Driven Life.”

SCARBOROUGH: There‘s “Purpose Driven Life,” and the first line of that, “It‘s not about yourself, it‘s about serving others.” How about that?

MATTHEWS: And Reverend Sharpton, you‘re a generous fellow tonight, and I appreciate having you on.

SHARPTON: Well, I appreciate having met Reverend Falwell many times on this show.

MATTHEWS: Thank you very much...

(CROSSTALK)

MATTHEWS: Well, when we put you guys to fight in the ring, I‘ve noticed that fighters, when they leave the ring, are very close together after the battle. Anyway, thank you, Joe Scarborough. Thank you, Reverend Al Sharpton.

Now to London. “NBC NIGHTLY NEWS” anchor Brian Williams just returned from 10 Downing Street, where in an exclusive interview, he interviewed outgoing British prime minister Tony Blair. There he is. Brian, thank you for joining us. You are at the tower—no, you‘re at the London Bridge.

BRIAN WILLIAMS, “NBC NIGHTLY NEWS” ANCHOR: Tower Bridge, that‘s right, Chris. And you know, I have to tell you that aides to Tony Blair, when we were done with this interview today, said they could not remember a longer interview he had ever sat for in his entire time as prime minister. I‘m just looking at my notes, at what we covered. He said it was not a civil war in Iraq. He said Sunnis and Shias basically get along, except for an agitated minority. We talked about Prince Harry, the idea of him fighting in Iraq. We talked about the queen, about Presidents Clinton and Bush. He says he‘s been considering this decision, leaving at this time, for years.

And back on the subject of Iraq, I have something I want to show you, a snippet of our conversation. I ask him repeatedly if he‘d do anything differently upon going back over it, in effect, if he had any regrets.

(BEGIN VIDEO CLIP)

WILLIAMS: Would you do it again? If you knew it all today—the WMD threat wasn‘t there, what was going to happen in the aftermath, no plan for follow-on strategy—would you make the same decision to go with President Bush?

TONY BLAIR, BRITISH PRIME MINISTER: I would make the same decision to remove Saddam, yes.

WILLIAMS: Did you, in fact, say to him, as was reported in the Bob Woodward book, I‘m with you until the end?

BLAIR: I told him I was with him once it was clear that Saddam was not going to comply with the U.N. resolutions, yes. I—I—you know, I‘ve never made any secret of the fact that this wasn‘t an act for me of—simply of, Well, America wants it, you know, that‘s what we‘ve got to—we‘ve got to do. Of course, I believe in the alliance, but I believe in it for a reason, you know? And I believe that September the 11th was an attack on all of us. And my own view now, today, is even clearer than it was back then.

WILLIAMS: What was your darkest time in Number 10?

BLAIR: I think any time that you commit your forces to war is the toughest time. When, for example, when we had the terrible Omar (ph) bomb which almost threatened to disrupt the whole of the Northern Ireland peace process, fortunately didn‘t, and we managed to carry it on. But those—it‘s the major events that are about life and death.

I mean, you know, we do—here we do health service reform and education reform, you know, the law and order stuff and the—the routine things that governments are immensely important, incidentally, for people‘s lives—but you don‘t measure them emotionally in quite the same way. Whereas I think any time when you‘re taking decisions that you know actually do mean genuine life or death for people, then, well, I think there‘d be something flawed in you as a human being if you didn‘t understand that—the awesome nature of that responsibility.

(END VIDEO CLIP)

WILLIAMS: And Chris, this was a full-throated defense of his policy being with George W. Bush on the war. He also said that he refused to draw any connection between actions that American and British troops have taken in the Arab world, in Iraq, and the home-grown terrorism that Tony Blair has fought here—Chris.

MATTHEWS: So he doesn‘t see any bad reaction to our war in Iraq. He doesn‘t see it stirring up more hostility toward the West, especially against Britain and America.

WILLIAMS: He won‘t have that. As you know, he really believes that this can be averted, this so-called clash of civilizations. He believes that, ultimately, the allies will be seen for their good intentions and a good works they‘re doing over there, though he could not name an end date where success could be named and labeled, per se.

MATTHEWS: Do you have a sense that he realizes he‘s much more popular in the States than he is at home?

WILLIAMS: I think, perhaps, Chris. He sees and reads and hears the media, of course. I asked him if his model post-presidency was going to be Bill Clinton or perhaps Harry Truman, a guy who left office, as you well know, with low poll numbers, not terribly popular with his countrymen and women. But as we get kind of gauzy and wistful, as Americans look back on the characters who‘ve inhabited the White House, and their leadership and how they come into office has grown in public sentiment. And he said perhaps that would be his model post-prime minister. But in every way, he understands his legacy is tied to what he did together, in concert with George W. Bush.

MATTHEWS: Well, he did great things for Northern Ireland. I think we‘ll agree on that. Brian, thank you very much, and congratulations on this great exclusive get for NBC News, an interview tonight with the British outgoing prime minister on “NBC NIGHTLY NEWS” tonight.

Up next, Republican Party chairman and Florida senator Mel Martinez.

You‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL.

Florida Senator Mel Martinez is chairman of the Republican National Committee.

Senator, thank you very much for joining us.

I don‘t know whether you caught the MSNBC Republican debate a few weeks back, earlier this month, but I want to watch this snippet.

I asked all the candidates, starting with Mitt Romney, whether they would change the Constitution to allow you and people like you who are patriotic Americans of great standing, but happened to have born in another country, in your case, Cuba, or Arnold Schwarzenegger, give these guys a chance.

MATTHEWS: ... and so many people who have come to this country years ago.

I mean, my grandmother came here in the teen—her teens, and lived until her late 80s. Seventy, 60 years, she was around voting. They‘re here a long time, and they don‘t get to run. Fair enough. I guess that is the Constitution. We live with it. But this ‘tude of quickly saying, no way...

MARTINEZ: Well, look, I think it‘s also the historical basis for it, which is not very deep. I think it was more about Jefferson vs. Hamilton and...

MATTHEWS: Really?

MARTINEZ: ... trying to keep Hamilton from being president. I mean, I have heard that.

MARTINEZ: At the end of the day, you know, we—we have a nativist instinct that is a bit of a threat in our country today, which isn‘t really very positive.

At the end of the day, we live in a global economy and a globalized world. And I think, the more we can do to make sure that America remains competitive, continues to be a place that welcomes legal immigrants, and continues to be a place of hope and opportunity to all, that is really what it‘s all about.

It is the only thing that someone like myself, who has been so blessed in America, is limited from doing. I suppose there will come a time when that no longer will be a limitation. We have an awful lot of voters in America that are either first- or second-generation immigrants.

MATTHEWS: I know. I know that.

Let me ask you about the grand Republican coalition, which includes a lot of people from the Cuban community, Cuban-American community. They‘re both Roman Catholic and, of course, but also evangelical, increasingly, in the Latino community.

What do think about the loss of Falwell? I was just looking at the numbers today—we dug them up -- 30 million evangelical Christians voting last time, which ballooned the electoral rolls up to 121 million people voting. That whole margin for the Republican Party, if you do the number analysis, is evangelicals. Are we going to see that come back out and vote again in 2008?

MARTINEZ: Well, let me say, first of all, we should extend our condolences to the Falwell family. He was a person who did an awful lot in the public arena, who built a university and many other good things.

But, you know, also, he was someone who an integral part of what began as the Moral Majority and a movement of people of faith who got involved in the public arena. They‘re not going away, Chris. I think that the tremendous vote that they showed in the last election is going to continue into the future.

I was very fortunate to have strong support in that community. I think that many candidates continue to want that support. And I think you will see that into the future. I don‘t think candidates of either party would not want to have an opportunity to be in front of those—of those folks, who are good voting people and contributors to our country in many, many ways.

MATTHEWS: Would you like Fred Thompson to jump in this race, because he is a man from the Bible Belt? He‘s a Christian evangelical from Tennessee. Is he more to the liking, perhaps, than the other candidates of the people we‘re talking about?

MARTINEZ: Well, he is certainly someone that there‘s a lot of interest in. And I think he‘s enjoying it a great deal.

MATTHEWS: And I want to wish Brit Hume well tonight, and also Chris Wallace and the others, because it is a great opportunity to—to organize and to moderate and to question these candidates for president.

Up next: With another one of his top deputies gone, will Alberto Gonzales keep his job? He has lost four top deputies in the last couple weeks.

The Dow Jones industrial average closes at another record high today, at 13383, up just some 37 points. The Dow was more than 100 points higher at one point during today‘s trading session, before retreating. Meantime, the broad market S&P 500 fell almost two points on the day, the tech-heavy Nasdaq down some 21.

Stocks surged in early trading, after the government reported, consumer prices rose a lower-than-expected four-tenths-of-a-percent in April. That sign of easing inflation raised hopes of lower interest rates. But gains slowed, after a report indicated the housing outlook has deteriorated. The median price of homes was down 1.8 percent.

And the weakness in the housing market helped put a dent in Home Depot‘s bottom line. The world‘s largest home improvement chain posted a 30 percent drop in first-quarter profits, below Wall Street expectations.

One day after the number-two official at the Justice Department resigned yesterday, amid the inquiry into whether federal prosecutors were fired for political reasons, Attorney General Alberto Gonzales today tried to distance himself from the scandal.

Gonzales said the official who resigned yesterday, his deputy, Paul McNulty, knew more about the firings of those eight U.S. attorneys than he did.

HARDBALL correspondent David Shuster has the latest on this finger-pointing and blame-gaming.

(BEGIN VIDEOTAPE)

DAVID SHUSTER, NBC CORRESPONDENT (voice-over): Two months after Attorney General Alberto Gonzales said he was taking responsibility for the prosecution firings, today, Gonzales blamed his deputy.

ALBERTO GONZALES, U.S. ATTORNEY GENERAL: Because the deputy attorney general is the direct supervisor of the United States attorneys. In this particular case, Mr. McNulty was a former colleague of all of these United States attorneys.

SHUSTER: The deputy attorney general is Paul McNulty, who announced his resignation on Monday.

Most of McNulty‘s career has been on Capitol Hill. He was the chief counsel for impeachment proceedings against President Clinton. He was named a federal prosecutor five years ago, despite no trial experience. Then, McNulty was named Gonzales‘ second in command.

This year, McNulty helped spark the U.S. attorneys scandal by telling Congress that most of the firings were related to prosecution performance problems, even though documents indicate the firings were prompted by officials at the White House, including Karl Rove.

McNulty and Gonzales have been quietly feuding for months, with Gonzales, according to aides, infuriated that McNulty broke open the White House involvement by testifying about Rove.

Gonzales has testified he cannot remember his own conversations about the U.S. attorneys with Rove and with President Bush. Gonzales has also been unable to explain a meeting he led with top Justice Department officials just before the prosecutors were fired.

So far, four senior Gonzales aides have resigned over the scandal, but nobody has clarified who exactly was responsible.

SHUSTER: Today, after an anti-Gonzales protester was escorted out of the National Press Club, the attorney general opened up the session to questions. But he repeatedly ducked those he didn‘t like and passed the buck on whether he should resign.

GONZALES: And, as to whether or not my resignation would be appropriate, at the end of the day, that really is a question for the president of the United States.

SHUSTER: The president has insisted that Gonzales is not going anywhere.

And, today, on Capitol Hill, senators in both parties again expressed their exasperation.

SEN. PATRICK LEAHY (D-VT), JUDICIARY COMMITTEE CHAIRMAN: And I hope whoever the next president is will make a vow to never, never, never to allow this politicization of the Department of Justice.

SHUSTER: Meanwhile, as if Congress wasn‘t angry enough, today, lawmakers heard about an incident when Gonzales was White House counsel.

Former Deputy Attorney General James Comey testified about the time in 2004 when the White House was trying to extend the government‘s warrantless surveillance program. The Justice Department opposed the program, but the attorney general at the time, John Ashcroft, was in the hospital with a serious case of pancreatitis.

Ashcroft got a bedside visit by White House Chief of Staff Andy Card and White House counsel Alberto Gonzales. The officials had documents they wanted Ashcroft to sign. Ashcroft passed the decision to Comey, who told the White House officials no, and criticized their strategy.

JAMES COMEY, FORMER DEPUTY ATTORNEY GENERAL: I was concerned that this was an effort to do an end run around the acting attorney general and to get a very sick man to approve something that the Department of Justice had already concluded...

UNIDENTIFIED MALE: Right.

COMEY: ... the department as a whole, was unable to be certified as to its legality.

SHUSTER: When Ashcroft left the Justice Department, President Bush nominated White House counsel Alberto Gonzales to replace him as attorney general.

(on camera): Lawmakers today seized on the Gonzales hospital episode and said it underscored his tendency to put loyalty to President Bush ahead of almost everything else.

But, for Gonzales, that appears to have paid off, because, while the U.S. attorney scandal may yet inflict even more damage on the Justice Department and the Bush administration, Alberto Gonzales is still there.

I‘m David Shuster, for HARDBALL, in Washington.

(END VIDEOTAPE)

MATTHEWS: Amazing. Great report, and even better than usual, from David Shuster.

This is complicated stuff.

David Iglesias was fired from his post as U.S. attorney out in New Mexico. And he filed a complaint with the Office of Special Counsel against Attorney General Gonzales, Paul McNulty, Kyle Sampson, and Monica Goodling.

Well, three-quarters of the people you are suing have already quit. What‘s going on at the Justice Department? Everybody is quitting around Gonzales.

DAVID IGLESIAS, FIRED U.S. ATTORNEY: Yes. What is that old naval image, rats jumping from a ship?

MATTHEWS: Yes.

IGLESIAS: That is what is—that is what is going right now. They see that the end is near, that it is not going to get better; it‘s going to get worse. So, people are leaving in droves.

MATTHEWS: Who runs the Justice Department? Is it the White House staff using Gonzales as a figure head or is Gonzales running that place?

IGLESIAS: Well, historically, the attorney general and deputy are in charge of the Justice Department. I think right now the White House, the West Wing, is running the operations.

MATTHEWS: Who? Dan Bartlett? Josh Bolten? Who is running our Justice Department in this country? A bunch of local pols at the White House?

IGLESIAS: It is hard to tell with 5 million missing e-mails. I really hope the Senate and the House get those e-mails because they will give us a picture of what is going on.

MATTHEWS: When you were a U.S. attorney out in Santa Fe, right?

IGLESIAS: Albuquerque.

MATTHEWS: Albuquerque. When you thought mentally back there—everybody always knows who there boss is. Who was your boss? Was it Karl Rove at the White House? Who did you mentally consider the honcho over you?

IGLESIAS: Never considered Karl Rove or anybody in the West Wing. It was always the deputy attorney general.

MATTHEWS: And you believed they were in charge?

IGLESIAS: I did, deputy and the attorney general. Those are the only two people United States attorneys report to.

MATTHEWS: And now what do you think?

IGLESIAS: Well, now I think there is a huge dark cloud. I don‘t know.

MATTHEWS: Do you think that these people were front people for the White House political operatives like Karl Rove, that they just pulled the strings and these guys jump?

IGLESIAS: Distinct possibility, yes.

MATTHEWS: Well, you‘re suing these guys, so what do you think? You can‘t say distinct possibility. Do you believe that those people did you in or the White House political operatives did you in?

IGLESIAS: I have stated all along that my termination is political in nature and has got done nothing to do with performance. And what I‘ve done is I‘ve authorized Office of Special Council to investigate, to enforce production of emails and documents, so that we can find out why I was terminated. That‘s what‘s going on.

MATTHEWS: OK, explain this to a person out there who may not be political. I keep looking at poll numbers. I love poll numbers. About four in 10 people think that Gonzales should be sacked. About three in ten say no. And I guess the others aren‘t really that involved. So it‘s not an overwhelming call for this guy to be sacked out there. Why do you think he should be?

MATTHEWS: Where would you vote if I were polling you? You‘ve been the victim of this thing. Do you think Jim Comey would be a better A.G.?

IGLESIAS: Let me say this about James Comey, stand up guy, career federal prosecutor. He understands criminal law and he understands what U.S. attorneys do. He understands the mission of the Justice Department.

MATTHEWS: And Gonzales does not understand any of those things, you‘re saying?

IGLESIAS: Well, no, because he has a completely political background, which is normally OK if your deputy has a career prosecution background, like Jim Comey. Right now you‘ve got the top echelons at the U.S. Justice Department with political, not prosecution backgrounds.

MATTHEWS: Who packed the top of our Justice Department with political retainers?

IGLESIAS: I suspect Rove, working in conjunction with senators from across the country.

MATTHEWS: Why did they do it? Just for patronage; just so they could fill it with their friends and they didn‘t think it was that important, or were they trying to push a certain policy over there?

IGLESIAS: Well, as I understand it, the so-called voter fraud problem was kind of the fire that lit everybody up. They really believed there was systemic voter fraud going on.

MATTHEWS: Out in New Mexico?

IGLESIAS: Well, New Mexico and other battleground states, Missouri, Wisconsin, other places like that, yes.

MATTHEWS: What is your experience with voter fraud? Do you think the Democrats benefit more from it; the Republicans benefit more from voter suppression? That seems to be the pattern that most people think of. Republicans try to discourage poor people from voting. Democrats sometimes find dead people to vote, sometimes. That‘s the bad old days, maybe.

IGLESIAS: And the truth is somewhere there. But as federal prosecutors, would don‘t care about all of that stuff. We care about can we prove the case. Can we prove that voter fraud occurred? Did it violate a federal crime? I instituted a joint task force. I worked with the state and local law enforcement. We looked into allegations. At the end of the day, working very closely with the Justice Department in Washington—

MATTHEWS: What about the charge, I‘ve heard, that there are a lot of young kids that weren‘t even legal citizens who were voting in New Mexico? They don‘t have a constitutional right to vote.

IGLESIAS: We looked into over 100 allegations of voter fraud and at the end of the day not one prosecution came out of my office.

MATTHEWS: Do you think the attorney general, Alberto Gonzales, should be prosecuted for something?

IGLESIAS: Well, if the evidence leads us to believe that he intentionally obstructed justice or tried to send one of his minions to intimidate McKay and Cummins and the rest of us to not testify in front of Congress, it is a potential criminal violation.

MATTHEWS: Can you make that case in court?

IGLESIAS: Not yet.

MATTHEWS: Are you going to try.

IGLESIAS: We‘ll see.

MATTHEWS: Have you got attorneys to help you make that case? Are you going to try to gather evidence to make that case?

IGLESIAS: At this point no. But there are some very troubling trends with what is going on, with the evidence that we are looking at right now. There appears to be evidence leading toward obstruction of justice and witness intimidation.

MATTHEWS: This is HARDBALL, Mr. Iglesias. Has a Alberto Gonzales been a bad attorney general, yes or no?

IGLESIAS: No, pardon me. Has he been a bad—

MATTHEWS: Attorney general.

IGLESIAS: Yes.

MATTHEWS: OK, thank you very much David Iglesias. Up next, the HARDBALLers dig into the latest developments on the campaign trail. This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. We have more on the death of Reverend Falwell and a preview of the GOP debate tonight. We turn to our HARDBALLers, Democratic strategist Steve McMahon, and Rudy Giuliani campaign advisor Susan Molinari. Anyway, good evening.

Susan, Rudy Giuliani had a tough time in that debate that I moderated, not by any fault of mine. But he did not seem to be prepared for a simple question; what would be your reaction if Roe vs. Wade was overturned? He gave two answers, it would be OK it was overturned, OK if it wasn‘t. It was like John Kerry saying I voted for the 87 billion before I voted against it. What does he have to do tonight to fix his cart?

SUSAN MOLINARI, RUDY GIULIANI CAMPAIGN ADVISOR: We‘ve been through this so I won‘t go through this again. He gave a judicial interpretation. He gave an answer to a question.

MATTHEWS: OK, what‘s he got to do tonight politically?

MOLINARI: I think he is going to be consistent with his answers. He is going to understand that in a 30 second sound bite, sometimes you have to make your answers more concise.

MOLINARI: Of course he is pro-choice. Can we just—I know the media doesn‘t want to get off this. He‘s pro-choice. He‘s said he‘s pro-choice. He also said he was for strict constructionist judges. That why when you ask that question, it wasn‘t a simple good or bad.

MATTHEWS: OK, where is he on funding for abortion, public funding for abortion? He‘s for it if it‘s in New York, apparently.

MOLINARI: He said he is for it in the case of rape, incest and the life of the mother.

MATTHEWS: Oh, public funding in those cases, but not in other cases.

MOLINARI: Yes.

MATTHEWS: I didn‘t know he done that slice.

MOLINARI: I think he said the Hyde Amendment.

MATTHEWS: But that doesn‘t affect states. OK. It means federal money can‘t be used, but state money can be used.

MOLINARI: But let me just say, I think that tonight is going to be great because I think what happened is the pressure is now off of Rudy Giuliani. He did his appearance. Everybody understands that, you know—

MATTHEWS: I still think he‘s the front runner. I checked the Irish betting odds and McCain‘s up by a point over him. I don‘t know what‘s going on. He‘s falling a little bit.

MOLINARI: I can‘t even debate the Irish betting odds.

MATTHEWS: I can‘t understand the betting odds. They‘re moving against him. They‘re the international betting odds. Why is Giuliani doing well in the polls, but people think he‘s a little less of a good bet to win right now?

MOLINARI: What people?

MATTHEWS: The betters. Follow the money.

MOLINARI: I‘m going home.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: The reason is because most of America knows him as the mayor who stepped in on 9/11, and by all accounts seemed to have done a pretty remarkable job. But the Republican primary voters get to cast their votes first. He is not just pro abortion. He is pro gay rights.

MATTHEWS: Pro abortion rights, be careful here. He is not pro abortion.

MCMAHON: OK, I‘m sorry. He is not just pro-choice. He‘s pro-gay rights. He‘s a very open minded guy. He, frankly, would maybe fit a little bit better in the Democratic party.

MOLINARI: You remember the ballot initiative strategy designed to turn out right wing Christian conservatives. That was all about banning gay marriages all around the country.

(CROSS TALK)

MATTHEWS: -- but gay rights, I think people would say everybody is entitled to equal rights.

MOLINARI: I don‘t think most people in the Republican party, certainly not the Christian conservatives, think that gay is an alternative lifestyle.

MATTHEWS: It‘s called rights. You don‘t have to like it. You don‘t have to tolerate it. You simply say they have a right to an apartment. They have a right to a job. They have a right to a promotion. They have a right to whatever, the same economic rights we have. That‘s not like saying I salute their lifestyle.

MCMAHON: Most Christian conservatives don‘t believe that gay couples deserve or are entitled to equal rights under the law. That‘s a fundamental difference between Democrats and Republicans.

MOLINARI: It‘s not. The majority of Republican candidate have said that they believe in that.

MCMAHON: The majority of the Republican candidates? Most of the Republican candidates for president this year are pretty moderate. That is why they are having so much trouble as it is.

MOLINARI: Oh my gosh. That is so not true.

MATTHEWS: He‘s going to make your party worse than it is. We will be right back with Susan Molinari and Steve McMahon. You‘re trying to make it a cartoon of evil here. You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. We‘re back with Democratic strategist Steve McMahon and Rudy Giuliani campaign advisor Susan Molinari. What‘s it like sitting around with Rudy, talking over the campaign with him? Does he like advice from someone like you?

MOLINARI: You know what? The honest truth is I have not sat around with him a lot.

MATTHEWS: We just called you an adviser.

MOLINARI: I am in contact with the campaign on a daily basis, but Mayor Giuliani, as we all know, has his own ideas and his own direction and he follows his heart and his spirit. And he‘s consistent with that.

MATTHEWS: Why does he need an adviser then?

MOLINARI: Everybody needs an adviser. You could probably deal with a little adviser every now and then.

one thing, because you let Steve talk about Republican party politics for -

he defined the Republican party.

MCMAHON: How did I do?

MOLINARI: Wishful thinking on your part. Despite what all the intelligentsia in Washington are yapping about, that Rudolph Giuliani, after the last, in a “Wall Street Journal” poll released today, 38-18, and in South Carolina is only five point down from Senator McCain. And we all know Senator McCain has spent a significant amount of time in South Carolina.

MATTHEWS: Is he hiring John Bolton, the hard line former U.N. ambassador as his foreign policy adviser? Is going to go in with the neo cons on this war now? Is he really going to hire John Bolton?

MCMAHON: He‘s already with him.

MOLINARI: Rudolph Giuliani is where he is because he understands—look, there‘s nobody that understands the war on terror—

MATTHEWS: Well, Wolfowitz will be looking for a job soon. Put him on the campaign payroll. Jesus, you‘ve got Feith over at Georgetown. Put them all back on the payroll.

MCMAHON: First he has to blame his girlfriend for what happened at the World Bank. That‘s attractive, isn‘t it.

MATTHEWS: OK, this is getting to be more like a dinner party here. Let‘s take a look at a new ad that just came out from VoteVets.org. It‘s generals, ex military people of very high flag rank going after John McCain.

(BEGIN VIDEO CLIP)

BUSH: I have always said that I will listen to the requests of our commanders on the ground.

MAJ. GEN. JOHN BATISTE, U.S. ARMY (RET): Mr. President, you did not listen. You continue to pursue a failed strategy that is breaking our great Army and Marine Corps. I left the Army in protest in order to speak out. Mr. President, you have placed our nation in peril. Our only hope is that Congress will act now to protect our fighting men and women.

Senator McCain, protect America, not George Bush.

(END VIDEO CLIP)

MATTHEWS: Wow, what do you think of that?

MOLINARI: First of all, obviously the people who are up there are people who have served this country well. So, not to take away from their motivation, but this is also the same group who has come out against Senator George Allen and Senator Rick Santorum during last year‘s election. So I don‘t know.

MATTHEWS: They did a pretty good job, didn‘t they. Where are Santorum and Allen right now?

MOLINARI: I‘m just pointing out that it was Republicans. I‘ll ask the question. I don‘t know the answer. Have they ever done an ad against a Democrat? I don‘t know that answer.

MCMAHON: There was a different group of veterans that went after John Kerry.

MATTHEWS: Now that I hear that that organization destroyed Santorum, or helped destroy Santorum and destroy George Allen, maybe they do have some clout. What do you think? Do those ads hurt?

MCMAHON: They certainly hurt. I think it‘s interesting that the president makes a big deal about listening to the generals on the ground, unless the generals on the ground happen to give him advice that goes against his own instinct to be stubborn and obstinate and to ignore Congress and the will of the people. He‘s going to get it when the elections come around and 20 or 30 more Republicans go down.

These guys are targeting some of the 11 Congressman who are there at the White House just last week, saying to the president, you have until the fall, and then we‘re out.

MATTHEWS: You know how to get the truth about these guys? You buy their book. You‘ve got to wait and buy the book. That seems to be the new rule. Anyway, Steve McMahon, I‘m sorry about being nice. You‘re so great. Did I say sorry about being nice? Susan Molinari, thank you.

MOLINARI: Not appropriate for tonight.

MATTHEWS: -- Rudy‘s got time for. Join us again tomorrow night at 5:00 and 7:0 Eastern for more HARDBALL. Right now it‘s time for “TUCKER.”

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.